Good morning. Allow me to begin my remarks by thanking the organizers for their kind invitation.<\/p>\n
The world is changing, and very rapidly, and the financial system and banks are no exception. This changing environment has multiple dimensions: the “new normal,” which after the crisis places economic growth and interest rates at a lower level; the digital finance revolution; the new regulatory framework; and, of course, geopolitical developments\u2014specifically, Brexit and the new leadership in the United States. My intention today is to focus on these geopolitical developments and their consequences for banking regulation and supervision. <\/p>\n
Beginning with the new U.S. Administration and its policies oriented, in principle, both toward fostering a favorable climate for business and companies and toward prioritizing domestic interests in the short term, I believe it is necessary to reflect on what can be expected from them, while acknowledging the high degrees of uncertainty associated with any analysis of this type.<\/p>\n
Since these new policies will cover areas as broad as trade, relations with multilateral organizations, foreign policy, and defense policy, I will limit myself, with your permission, to analyzing those policies related to my sector: banking.<\/p>\n
From the standpoint of banking regulation, efforts to strengthen the regulatory framework after the crisis have already borne fruit. What remains is to complete what the sector calls Basel IV and what regulators call the final and complementary aspects of Basel III, which basically consist of limiting the use of internal models for calculating regulatory capital, with measures ranging from establishing floors (either based on structural parameters of these models, the input floors, or through limits on the benefit obtained from using them, the output floors) to eliminating models for certain risks, such as operational risk. Although the discussion of these proposals has been difficult and lengthy, the reality is that, today, the distance between the industry’s position and that of the regulators has narrowed considerably, and that the implementation of this package\u2014let’s call it Basel 3.5\u2014will not lead to significant increases in the capital requirements of institutions, at least not for Spanish ones. <\/p>\n
U.S. banks will not be affected by these proposals, as their local regulatory regime is already stricter than what was agreed in the Basel Committee. For example, American banks cannot benefit from the use of models, as the output floor is 100% of the standardized approach. In addition, the stress tests, the so-called CCAR (Comprehensive Capital Analysis and Review), were very demanding, not only in terms of the quantitative requirements of these tests, but especially regarding the qualitative requirements. It is true that U.S. banks have certain advantages over European ones thanks to the so-called mortgage agencies\u2014Fannie Mae and Freddie Mac\u2014which allow the mortgages granted to their clients to leave their balance sheets and go to the balance sheets of these agencies. And also thanks to the fact that the American accounting standard, US GAAP, offers the possibility of recording derivative positions by their net volume\u2014assets minus liabilities\u2014something that is not possible with our accounting standards, IFRS (International Financial Reporting Standards). But, despite these differences, it would not be at all fair to describe the regulatory position of the American authorities as lax. On the contrary, the gold-plating, to use European jargon, applied by the American authorities to their banks has been considerable, and their regime is currently much more demanding than that applied in the EU. <\/p>\n
Therefore, in the United States there is ample room to reduce the regulatory and supervisory burden on banks without violating any international commitments on banking regulation. In other words, we should not expect any regulatory capital relief from political changes in the United States. <\/p>\n
Such deregulation, if it occurs, would probably take the form of relief in procedures and in the specific supervision of regulations, rather than a reduction in quantitative requirements for bank capital.<\/p>\n
Undoubtedly, and as has happened in the past, American regulatory leadership will be felt in the rest of the world in the coming decade.<\/p>\n
But all that has been said should not lead us to underestimate the potential relevance of the changes.<\/p>\n
Allow me to highlight two elements of concern.<\/p>\n
First, the regulation of systemic banks or SIBs is very advanced, both in terms of higher capital requirements and in terms of resolution. However, extending the systemic institution regime outside the banking sector\u2014to insurance companies, asset managers, or infrastructures such as CCPs\u2014still requires additional efforts. If we have one highly regulated sector and others that are not as regulated, we already know that the powerful forces of capital arbitrage will lead us to a situation in which risk will shift from the more regulated sectors to the less regulated ones, with the consequent problems of financial instability. <\/p>\n
Second, to the extent that these new regulatory policies are implemented in isolation, without consensus with other financial blocs, the regulatory regime designed after the crisis may become ineffective. In other words, proper functioning of the international financial system requires levels of cooperation between supervisory authorities considerably higher than those existing until now. Therefore, any tendency toward regulatory autarky, toward ring-fencing, would jeopardize the new international regulatory paradigm. For example, the resolution of international banks through the SPE (Single Point of Entry) strategy requires very high levels of cooperation between authorities, both in the preparation phase\u2014that of defining resolution plans\u2014and, above all, when it is necessary to resolve a large international bank. <\/p>\n
Allow me a parenthesis. Spanish international banks, which have a structure of independent subsidiaries in terms of capital and liquidity, are better prepared for a world in which international cooperation is less fluid. Indeed, this organizational structure allows their resolution to be carried out through the MPE (Multiple Point of Entry) strategy, that is, each independent subsidiary of the parent company can be resolved by the relevant national authority, which reduces the coordination needs between authorities both in the preparatory phase and in the execution phase. <\/p>\n
But let us move on to the second bloc, Brexit. Or, rather, to analyzing what direction the eurozone and the EU should take once the main European financial center, London, is no longer part of the Union. Let me say upfront that I am one of those who thinks that I wish Brexit had not happened, and that probably the biggest beneficiary of London’s exit from the EU will be New York, and not another financial center in the eurozone. But to the extent that Brexit is, from what it seems, irreversible, the European Union and, specifically, the eurozone has a duty to rethink the future of the two major projects underway: the Banking Union and the Capital Markets Union. <\/p>\n
We must start from the fact that the financial crisis has meant, for the EU and the eurozone, a strong setback in the levels of integration that had already been achieved among the different markets and financial sectors of the Union’s member states. Not in vain has the Bank for International Settlements mentioned in recent studies that the regression observed in the levels of financial globalization is due exclusively to those recorded in the eurozone banking system. These facts should make us reflect on the weaknesses and contradictions of the monetary and financial integration project represented by the euro. And, in any case, it obliges us not only to deepen financial integration in the eurozone, but first to recover the levels of integration existing before the crisis. <\/p>\n
The two major projects launched by the EU in terms of financial integration are the Capital Markets Union, or CMU, and the Banking Union project, with its triple dimension of banking supervision by the ECB\/SSM, banking resolution by the SRB (Single Resolution Board), and the European Deposit Insurance Scheme (or EDIS).<\/p>\n
The Capital Markets Union project was designed before Brexit and, to some extent, represented a guarantee that London would not only continue to be the main financial center of the EU, but would, in fact, see its predominance increase. Indeed, to the extent that this project aims to increase the financing of the European economy through markets at the expense of the banking channel, London was called upon to channel a large part of that increase in financial resources obtained from markets. The emergence of Brexit has a double effect on the project. First, if the EU had an excessive dependence on bank financing before Brexit, once it materializes, the financing of the real economy runs the risk of being even more dependent on bank financing. In a post-Brexit Europe, the Capital Markets Union is therefore even more necessary. <\/p>\n
The great paradox is that, without London, this project is not only more necessary, but also more difficult. Sometimes one has the feeling that this is not well understood either in Brussels or, above all, in European capitals. We need to be able to accelerate the process of creating strong capital markets in the EU if we want to minimize the impact of losing a financial center like London. Now, the political commitment to the Capital Markets Union must be much stronger than before, as the difficulties associated with the project have increased, as have the benefits of its implementation. <\/p>\n
To the extent that the Capital Markets Union project becomes more complicated after Brexit, it makes perfect sense to ask how we can accelerate the Banking Union process. The implementation of a European Deposit Insurance Scheme or EDIS, which goes beyond the current system of mutual support between national funds, is an essential step to complete the Banking Union. Although the problems of risk mutualization among the banking systems of member states are usually cited as the main barrier preventing progress on this third pillar, the truth is that EDIS also encounters national deposit guarantee systems that, de facto, offer coverage well above the \u20ac100,000 contemplated in European regulations. Since, in addition, these schemes are based in highly fragmented banking systems, with a multiplicity of small institutions, any change could cause instabilities in those systems. In short, although the third pillar of the Banking Union, the European Deposit Insurance Scheme or EDIS, is an obvious candidate for deepening the project, we cannot ignore the difficulties that arise for its implementation. We must therefore think of alternatives to maintain the integrating momentum and avoid the paralysis into which the Union may fall in these moments of confusion. <\/p>\n
Without doubt, a good idea, which was partly interrupted after the crisis and has now been resumed, is to create a single market for retail financial services. Sometimes we forget that European product harmonization has been one of the areas in which the European Union has achieved a certain global leadership in recent years. I am thinking, for example, of the UCITS regulation, which establishes the conditions for a fund domiciled in a member state to be distributed in the rest of the Union’s countries. A regulation that has become an international reference on how to regulate products such as investment funds. <\/p>\n
Could we extend this successful formula to other products and services? Not only do I believe it is possible, but even indispensable, although this would require going further and, instead of using the legal instrument of the Directive, which requires transposition into national law, resorting to the use of the legal figure of the Community regulation which, by applying directly in Member States without the need for national adaptation, ensures not only faster harmonization but, above all, greater homogeneity of the regulation. Let us think, for example, of mortgage credit, the most relevant banking product by volume, term, and for remaining on banks’ balance sheets for prolonged periods of time. A Community regulation on mortgages would mean homogenizing the most substantial part of banking balance sheets in the eurozone and would obviously allow progress in the construction of the Banking Union and, in particular, in the integration of retail financial markets. Since the mortgage markets of continental Europe have similar characteristics among themselves\u2014specifically, the universal liability of the debtor\u2014this regulation would not substantially alter the different national mortgage regimes. <\/p>\n
Another way to deepen the Banking Union would undoubtedly be cross-border mergers, which would give rise to the existence of pan-European banks. Obviously, public authorities can neither and should not promote corporate operations between private actors. But they can identify possible regulatory or supervisory barriers that hinder these operations, as well as policies that favor them. Among the former, the fact stands out that, in the eurozone, bank liquidity and capital are not fungible, that is, there are still supervisory practices of ring-fencing<\/em> that isolate capital and liquidity at the borders of member states. Among favorable measures, one could mention all those that, like those mentioned above, allow the homogenization and harmonization of financial products and services in the European market. <\/p>\n Probably, the best thing that can be done to complete the Banking Union is to adopt a firm commitment to avoid national gold-plating<\/em>, that is, the practice by which European directives are larded with specific national requirements that do not respond to global needs, but to local concerns, with, moreover, little permanence over time. Let us not deceive ourselves: political trends in Europe favor the emergence of localisms that distance us from the objective of deepening the Banking Union and, above all, of perfecting the Monetary Union, guaranteeing the uniqueness of our currency throughout the euro area. <\/p>\n But it is also advisable to undertake a certain self-criticism of how both processes have been approached, both the Banking Union and the Capital Markets Union. A colleague pointed out at a conference I attended in Brussels an incontestable fact: citizens do not observe that greater financial integration is a reality in their daily lives. Moreover, making the most common financial decisions has not experienced any novelty: the Banking Union or the Capital Markets Union have not happened for the average European citizen. We should not be surprised, then, that there is a tendency toward localism. Or, in other words, only if we are able to show citizens that European projects will expand their possibilities of choice in terms of savings, pension planning, and financing, will we be in a position to stop that local gold-plating<\/em> that threatens the single financial market. There is no other option, then, than to deepen the Union project. <\/p>\n Probably, and if we want the benefits of the single financial market to materialize, it will not be enough to deepen the project and bring it closer to consumers. Much is said about the differences between the financial system of the United States and that of the European Union, specifically the excessive role of bank financing in the EU. 75% of the financing of the productive economy comes from the banking system, compared to 25% in the United States. But one of the most important differences between the two economic blocs refers to risk culture: while on the other side of the Atlantic the predominant culture, also in savings and pension planning, is equity<\/em>, that is, assuming more risk in exchange for higher returns, in Europe it is debt, fixed income, guaranteed returns. Europe needs to establish guarantees for the financial investor, MiFID-type guarantees if I may use the expression, but it also needs more financing for SMEs, start-ups, venture capital, or active and deep markets for non-performing loans (the subject of an interesting European debate). We must be able to offer a framework of security, transparency, and guarantee for retail investors, while As you can see, there is much to be done, and although the environment, full of distractions derived from political uncertainties, does not invite calm reflection, today more than ever we need a strong and united Europe to weather the uncertainties derived from Brexit, the repositioning of the United States, and the internal rise of nationalisms. In a turbulent world, Europe must remember its strengths: both economic and political. Only together can European states overcome these turbulent times, but today they need to respond to these challenges by taking firmer and faster steps that drive the Union forward. <\/p>\n Inaction in financial matters is not an option available to us.<\/p>\n Jos\u00e9 Mar\u00eda Rold\u00e1n, Chairman of the Spanish Banking Association<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":" European states need to respond together to these challenges by taking firmer and faster steps that drive the Union forward. Inaction in financial matters is not an option available to us. <\/p>\n","protected":false},"featured_media":37329,"parent":0,"template":"","etiquetas":[578,576,322,305],"categorias-blog":[783],"class_list":["post-37328","blog-aeb","type-blog-aeb","status-publish","has-post-thumbnail","hentry","etiquetas-banca-internacional","etiquetas-brexit","etiquetas-regulacion","etiquetas-union-europea","categorias-blog-presidency"],"yoast_head":"\n
\nincentivizing the culture of equity, of financial investment that supports innovation, growth, and job creation. <\/p>\n